Groupon has reportedly toyed with delaying its IPO, with the Securities and Exchange Commission probing the group buying giant over the use of some accounting tactics used in an initial filing.
The new report comes just weeks after the company amended its original S-1 filing, deleting some references to profitability and shifting the position of chief executive Andrew Mason’s letter to future shareholders.
According to a new report from CNBC, regulators are concerned over the use of some of Groupon’s accounting metrics, pushing the group’s IPO to mid or late September. The report cites two people “familiar with the matter”.
The report is not a surprise, as various analysts have raised concerns over the use of what Groupon calls Consolidated Segment Operating Income. Mason said in the original filing that while the company recorded a loss of $113 million on revenues of $US644 million, it prefers to use CSOI because it views much of these expenses as one-offs.
Mason even said at the time that “we think of it as our operating profitability before marketing costs incurred for long-term growth”. It said CSOI was $81.6 million the previous quarter, and $60.6 million for calendar 2010.
It explains that because Groupon is expanding so heavily across the world, it needs to take into account one-off expenses that will set it up for growth.
However, analysts drew attention to that metric, saying it wasn’t an honest representation of how the company is performing. And after chairman Eric Lefkofsky said in a television interview that the company would be “wildly profitable”, regulators reportedly started paying attention and recommended changes to its filing.
One of those was that Mason’s comment about “operating profitability before marketing costs” was scrapped entirely, and replaced with a phrase that said CSOI, “while not a valuation metric… provides us with critical visibility into our business”.
Analysts said it is clear that the SEC wants to keep tabs on how Groupon is actually recording its success. And the new report also mentions that it may have a problem with Groupon’s use of gross profits.
In Groupon’s case, gross profits refer to the part of a sale that the company actually keeps after paying the merchant, but that doesn’t necessarily include all of the costs involved with that, like marketing.
The report claims that the SEC is now working with Groupon to amend its filing, with the company reportedly set on listing despite having to make a few changes.
The Groupon float is now expected in September, with many analysts expecting it to be one of the most notable listings of the new wave of tech companies, and a precursor to Facebook’s listing in 2012.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
